Demand for homes to rent has grown by 30% after initial decline in the wake of coronavirus. Our Rental Market Report examines the resilience of the rental market in 2020.
Demand for rental homes fell by 57% in the last two weeks of March 2020. This decline has since rebounded by 30% in the first two weeks of April.
Rental market bounce back
The impact of coronavirus has been less pronounced in the rental market, compared to the sales market. Demand for rental properties fell by more than 55% between 7 March and 30 March. In contrast, the sales market was hit by a 70% decline in buyer demand, after the government effectively suspended transactions.
The rental market has always been more flexible than the sales market, with those renting able to move into a new home within weeks.
Increased uncertainty following coronavirus means that households looking for a home will turn to the rental market first to meet any immediate housing needs.
Rental activity continues during coronavirus pandemic
The additional flexibility in the lettings market, which has allowed agents to agree rental contracts with delayed start dates and based on online viewings, means that activity has continued throughout the lockdown.
Similarly, activity levels are likely to rise more quickly in the rental market than the sales market once the coronavirus lockdown eases. That's because the average ‘time to let’ is less than three weeks in usual market conditions, compared to the three months average to complete a sale.
Once lockdown restrictions ease, activity levels are likely to rise and match previous years’ levels in the second half of 2020. It's predicted that the total number of home moves within the rental sector will be approximately 25% lower than in 2019.
No change to rental listings
The total number of properties listed as available to rent remains broadly unchanged since the start of the lockdown, down 3% since 1 March 2020, indicating that there has been no large-scale withdrawal of listings.
Demand for rented homes picked up across the UK in April 2020
The growth in demand has been broadly similar across the rental market, both by region and price band.
When examining which properties renters are looking at online, our data indicates that across the country, excluding London, the £500-£600 per calendar month (pcm) bracket is the most popular. This is consistent with trends seen before the coronavirus pandemic in the UK.
By contrast, Londoners appear to be looking for cheaper homes to rent. The most online interest was in properties with rents of between £1,200 - £1,300 pcm in April, compared to February when most interest was in properties priced between £1,400 - £1,500 pcm.
This could be partly attributed to a change in the financial circumstances of some renters, but it is premature to conclude whether this trend will persist.
Rental growth on upward trajectory since 2017
With annual UK rental growth - the increase in rental market rates - at 2.4%, up from 1.5% in March 2019, rental growth for the rest of the year is expected to remain moderately positive for landlords.
Our Zoopla Rental Market Report shows the annual rate of UK rental growth flattened in March 2020. This reflects seasonal trends, rather than pressures from the coronavirus lockdown.
Rents were up 2.4% in March, compared to 2.5% annual growth in February.
Despite the slight slowdown in growth, rental growth has been on a largely upward trajectory since March 2017 as demand for rentals increases and supply shrinks. But rental growth in London, having risen strongly since March 2017, eased in April 2020, with 1.7% annual growth, down from 2.3% in February.
"The flexibility of the rental market is one of the key factors which has allowed activity to bounce back more quickly than other parts of the property market. The rise in demand in the first two weeks in April indicates that some tenants are already mapping out their next move.
"As with the whole housing market however, activity levels and rental growth will likely be closely aligned to the economic landscape of the UK once the lockdown eases and the immediate impact of coronavirus starts to recede.
"Rental growth has increased steadily for the last three years as demand has increased in the face of dwindling new supply. But, if the responses to COVID-19 contribute to a rise in unemployment, as some official bodies have forecast, this will reduce the scope for any additional growth in rents. We expect growth to moderate this year, but to remain in positive territory."
Top 3 takeaways
1. In the two weeks to 30 March 2020, demand for rental homes fell by 57%. This decline has since rebounded by 30% in the two weeks to 14 April
2. The number of homes listed to rent is down by just 3%
3. Despite signs of life, rental demand is still 42% lower than at the start of March
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